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Financial abuse prevention law goes into effect Jan. 1

By MARY SELL, Alabama Daily News

Starting Jan. 1, banks in Alabama will be able to delay transactions on elderly and vulnerable customers’ accounts if fraud is suspected. 

The new law, approved by the Legislature earlier this year, was proposed by the Alabama Bankers Association. 

“It is fairly common now with all of the scams out there for our banks to see members of the communities we serve impacted by fraud, particularly elderly people,” said Scott Latham, the association’s president and chief executive officer.

Latham said bank employees can establish years-long relationships with customers, allowing them to realize changes in banking behavior that isn’t right.

“This bill gives us an opportunity to pause the transaction, if the banker feels that’s justified, and make sure that transaction is on the up and up,” Latham said.

The new law also applies to customers of credit unions. The Alabama Credit Union Association supported the legislation when it was being considered in the Legislature.

According to AARP, more than 334,000 incidents of elder financial exploitation are reported to authorities in the U.S. each year, causing an estimated $6.3 billion in losses. And those figures are likely lower than the true problem because abuse is underreported.

AARP Alabama was supportive of the legislation. 

“This is something that’s really important to our members,” AARP Alabama spokeswoman Jamie Harding said. “This gives the financial service providers that ability to refuse or delay financial transactions on accounts of elderly or vulnerable adults when they have reasonable belief that financial exploitation has occurred or is being attempted,” Harding said.

The bill was sponsored by Sen. Shay Shelnutt, R-Trussville, and Rep. Chris Blackshear, R-Phenix City.

The legislation was filed in the 2020 legislative session but got shelved with many other bills in the COVID-19-altered session.

“(Prior to the pandemic) we were really seeing a lot of elderly individuals that were really starting to be taken advantage of through just different schemes and type things in the financial sector,” Blackshear said. “So we thought it was really important to add an extra layer of protection for whom we see as being the most vulnerable, and that’s our elderly individuals.”

“No one knows their customers, elderly or not, like a bank,” Blackshear said. 

Normally, banks don’t discuss an account with anyone who isn’t named on it. The new law allows customers to provide a list of trusted individuals banks can contact should they suspect fraud or abuse.

The bill says that if a bank delays or rejects a transaction because of suspected financial exploitation, it has to notify the account holder and report the incident to the Alabama Department of Human Resources and a law enforcement agency.

“Those are pretty strong protections on the investigations side,” Harding said.

Financial institutions acting under the law in a reasonable manner are immune from criminal, civil and administrative liability. 

“The last thing we want to do is get in the way of legitimate transactions, legitimate business, but the first thing we want to do is protect our customers,” Latham said.

Fraud hurts the banks’ bottom lines, writing off significant amounts of money lost to scams each year, he said. The law doesn’t require banks to do anything.

“Each bank will decide how they use this opportunity,” Latham said.

Harding said AARP will work in the upcoming session to update the state’s guardianship and conservatorship laws, which haven’t been updated in about 30 years.

The next session begins Jan. 11.

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